What Happened To Houseparty? Why Was It Shut Down?

Executive Summary:

Houseparty is a social media platform that allows you to connect with friends and other users via video calls.

Houseparty was shut down because its usage declined severely after coronavirus restrictions across the world were lifted.

What Is Houseparty?

Houseparty is a social media platform that allows you to connect with friends and other users via video calls.

The platform can be accessed in a multitude of ways, for instance by downloading its Android or iOS app, Chrome extension, or by visiting its website.

Once an account is created, users can add friends by either sharing their contact list or searching their usernames.

Houseparty is primarily used to have video chats with friends. These chats can either be conducted between two people or in groups of up to eight people.

Furthermore, while Houseparty is mostly used for live video chats, users can also send so-called facemails, which are simply video messages that can be watched at a later point in time.

Apart from chatting over video, users can also play games with each other. The company has partnered with game creators like UNO for that matter. Additionally, users can also stream their Fortnite gameplay to friends and other users.

The Houseparty video platform was shut down in October 2021 after being acquired by Epic Games two years before. How it came to be, who was behind it, and what ultimately led to its closure will be covered in the next few chapters.

What Happened To Houseparty?

Houseparty, which was a sub-division of Life On Air and headquartered in San Francisco, California, had been founded in 2015 by Ben Rubin, Itai Danino, and Sima Sistani.

Its story, however, began much earlier than that. In 2012, Rubin, who pursued a degree in architecture at the Israel Institute of Technology during that time, as well as Danino incorporated Life On Air.

The goal of the business was to act as a catalyst that they would use to develop different social media platforms.

After raising a small seed round, the duo eventually released their first app in August 2013. Dubbed Yevvo, the app allowed users to not only follow their friends but also nearby events, locations, and more. Unfortunately, Yevvo never really took off.

Rubin decided to pack his bags and move to San Francisco to be closer to investors and other innovators. The team managed to raise an additional $3.7 million to continue exploring new business opportunities.

Over the coming months, they continued to dabble with various ideas. One of those ideas eventually turned into Meerkat, an app that CTO Danino had built by himself over an eight-week time span.

Meerkat utilized a corner feature of Yevvo, which had been extremely popular with its users. The feature allowed them to initiate a live stream to broadcast a concert they were attending, for example.

Danino took that concept to another level with the development of Meerkat. The app was directly connected to Twitter’s social graph, so users did not have to recruit a whole set of new friends to join the platform. Everyone you’d be friends with on Twitter would immediately be able to consume the live streams.

Meerkat was formally launched on March 1st, 2015, and immediately took off. Celebrities like Ashton Kutcher and Gary Vaynerchuk became some of the early adopters. Within two weeks, Meerkat had attracted over 120,000 users.

Unfortunately, things weren’t going as smoothly thereafter. Just days later, Twitter cut off access to its social graph. It, furthermore, purchased a competing startup named Periscope, which was still in beta, for $100 million (similar to Vine, which was acquired a few years prior).

Despite the cut-off, Meerkat became the talk of the town during the South by Southwest Interactive (SXSW) festival, a tech conference taking place each year in Austin, Texas. Ironically enough, Twitter also became famous at SXSW back in 2007.

The heightened attention allowed the team to raise another round of funding, netting them $14 million from the likes of Greylock, Comcast Ventures, and other Silicon Valley investors.

While Meerkat soon crossed the million-download mark (in part because it released an Android app before Twitter/Periscope), interest in the app soon began to stagnate. To combat the declining interest, Meerkat’s team was able to close a partnership with Facebook to use its social graph instead.

Yet, even subsequent partnerships with GoPro (to stream videos through the device) or the Discovery Channel (for content) weren’t able to stop its demise. To make matters even worse, Facebook also launched a live streaming feature months after their initial partnership announcement (which later became known as Facebook Live).

By the beginning of 2016, the founders realized that all hope was lost. Given that they still had over 70 percent of the cash they received from the $14 million fundraise, Rubin and his team decided to pivot once again.

After doing a company-wide retreat in Israel, they developed the initial idea of a live-video social network. This idea would act as the foundation of Houseparty, which they quietly introduced in February 2016.

On top of that, they recruited Sima Sistani, who had previously led teams at Yahoo and Tumblr, as the firm’s third co-founder and COO.

Despite the fact that they waited until September 2016 to make a formal announcement, Houseparty already surpassed Meerkat’s user count within months of being released. The app even reached the number two spot on Apple’s App Store in May, just three months after launch.

Over the summer, Houseparty’s user growth stalled because the app simply wasn’t able to handle all those newly joined users. As a result, Life On Air restructured its whole engineering organization, moving them from Israel to San Francisco while hiring a new Head of Engineering – ironically enough from Twitter.

With growth picking up again (the app crossed one million downloads in September), the team was able to get investors excited about the prospects of Houseparty. In December 2016, they successfully raised another $52 million round (led by Sequoia Capital).

By the end of 2017, more than 20 million people had already downloaded the app. Over the coming months and years, the team continued to iterate on the app experience, for instance by adding the ability to play games. Despite the fact that platforms like Facebook or Snapchat launched competing products, growth remained undeterred.

At the beginning of 2019, Houseparty finally began to monetize its userbase. It introduced an option to play games inside the platform. The first one was the popular mobile game Heads Up whose launch on Houseparty was even promoted on Ellen DeGeneres’ popular daytime talk show. The game itself was monetized by allowing users to pay additional packs for a small fee.  

In March, after seven years, CEO Rubin announced that he would step down from his role as CEO and hand the keys to COO Sistani. Rubin himself stayed on as a board member and advisor while proceeding to launch another business later that year.

Three months after that announcement, an even bigger one had been disclosed: Fortnite creator Epic Games said that it just had acquired Houseparty. Subsequent reporting revealed that the purchasing price was totaled about $35 million.

Interestingly, Facebook wanted to make a bid for the company at the end of 2018 but ultimately pulled out due to upcoming monopoly investigations by the Federal Trade Commission (FTC).

Meanwhile, Epic Game’s timing could have not been better. A few months after purchasing Houseparty, the novel coronavirus essentially forced people across the globe to quarantine at home.

Houseparty, next to Zoom, became one of the tools that allowed friends and families to stay connected with each other. The platform saw over 50 million signups in March 2020, alone. It, furthermore, became the number one social app in more than 80 countries.

Unfortunately, not everything was always going according to plan. In March, thousands of users reported that their accounts had been compromised, leading to deductions from their credit cards, amongst others.

Epic Games denied all these claims and even offered a $1 million bounty for anyone that would be able to show proof that Houseparty had been hacked. That proof came two months later from Zach Edwards, the founder of analytics firm Victory Medium.

He found that a well-known hacking group used dozens of subdomains owned by Houseparty to redirect users to malicious files. Once these files had been downloaded (without the user’s consent), they began infiltrating their devices and attempted to extract credit card data and other details.

Growth, however, remained unaffected. In May, for example, Houseparty launched a live music event called In The House that would have artists like Alicia Keys, Katy Perry, John Legend, or Snoop Dogg perform in front of millions of virtual attendees.

The platform even managed to partner with Michelle Obama’s non-profit, When We All Vote, to introduce a new game that would incentivize people to vote in the upcoming presidential election.

Epic Games itself also began to double down on its acquisition. In November, it unveiled an integration with Fortnite, enabling players to chat with friends while playing the game. Six months later, in April 2021, it introduced another huge update by allowing players to stream their Fortnite gameplay within the Houseparty app.

It, therefore, was somewhat of a big surprise when, on September 9th, 2021, Epic announced that it would wind down the Houseparty app at the beginning of October. Employees of Houseparty, such as CEO Sistani, either left the company or took on roles at Epic Games.

Why Did Houseparty Shut Down?

Houseparty was shut down because its usage declined severely after coronavirus restrictions across the world were lifted.

Epic Games never really specified why it decided to wind down the platform and simply said that “the team behind Houseparty is working on creating new ways to have meaningful and authentic social interactions at metaverse scale across the Epic Games family.”

Looking at the fate of similar applications, such as Dubsmash, it can be assumed that Epic’s reasoning for purchasing Houseparty was to gain access to its video streaming and chatting technology.

That technology (or the team that worked on it) could then be embedded into its existing games such as Fortnite.

With restrictions across the world being lifted, download numbers for Houseparty remained flat or even declined in some markets.

Epic probably came to the conclusion that it would take a significant monetary investment to reignite growth. Instead, it decided to depart from what many would consider a sinking ship before wasting even more resources.

Who Owns Houseparty?

Houseparty technically remains in the ownership of video game maker Epic Games, which acquired the company back in June 2019 for around $35 million.

As stated in the previous chapter, while Epic Games did not disclose the reasoning for its acquisition or shutdown, it can be assumed that getting access to its video streaming technology as well as coronavirus restrictions being lifted was a big reasoning behind the purchase and shutdown, respectively.

Hi folks, Viktor checking in! Years of experience in various tech-related roles have led me to start this blog, which I hope provides you with as much enjoyment to read as I have writing the content.